Regulatory

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Background

Under Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress expanded protections for whistleblowers reporting possible violations of federal securities laws to the Securities and Exchange Commission (SEC).[1] Specifically, the statute established certain financial incentives and confidentiality guarantees for whistleblowers reporting potential violations of securities laws. In 2011, the SEC implemented rules (as subsequently amended) regarding the Dodd-Frank whistleblower program. Under SEC Rule 21F-17(a), no person may take an action to impede an individual from communicating directly with the SEC about possible securities law violations, including by enforcing or threatening to enforce confidentiality agreements with respect to such communications (subject to certain limited exceptions).

On November 8, the Financial Crimes Enforcement Network (FinCEN) issued a final rule outlining the conditions under which a reporting company can report another entity’s FinCEN identifier instead of an individual’s beneficial ownership information (BOI). A FinCEN identifier is a unique number issued by FinCEN to an individual or a reporting company that has provided its BOI to FinCEN.

Troutman Pepper has been recognized for its exceptional work in the field of Banking & Finance and Financial Services Law in the 14th edition of Best Law Firms®. Our firm’s National Tier 1 rankings include Banking and Finance Law, Financial Services Regulation Law and Banking & Finance Litigation.

On October 13, California Governor Gavin Newsom signed into law Senate Bill 666, which amends the California Financing Law to prohibit a covered entity from charging certain fees in connection with a commercial financing transaction with a small business. Under the law, a small business is defined as an independently owned and operated business, with its principal office located in California, its officers domiciled in California, and, together with affiliates, 100 or fewer employees and average annual gross receipts of $15 million or less over the previous three years. “Covered entities” do not include depository institutions.

On November 3, the Financial Stability Oversight Council (FSOC) voted unanimously to finalize the procedures for designating a nonbank financial company for Federal Reserve supervision. FSOC’s Interpretive Guidance aims to establish a “durable” process for using its nonbank financial company designation authority, maintain rigorous procedural protections for companies reviewed for potential designation, and remove “unwarranted hurdles” to designation imposed by the 2019 Interpretive Guidance. FSOC had issued a proposed Interpretive Guidance in April 2023, which received 47 comments. The final version takes into account those comments.

As discussed here, on August 1, the two major national credit union trade associations — the National Association of Federal Credit Unions (NAFCU) and the Credit Union National Association (CUNA) — announced plans to merge and create a new organization called America’s Credit Unions. Today, CUNA announced that the organizations’ members voted overwhelmingly (94% of CUNA members and 86% of NAFCU members) in favor of the merger. America’s Credit Unions will be legally formed on January 1, 2024.

As reported in more detail on our Regulatory Oversight blog, the Securities and Exchange Commission’s Division of Examinations recently released its 2024 Examination Priorities report. The report underscores the SEC’s intent to focus on risk areas impacting market participants, particularly those related to cryptocurrency and emerging technology.

In a major victory for small business lenders, yesterday the U.S. District Court for the Southern District of Texas granted motions filed by three groups of trade association intervenors to extend the court’s existing injunction against the Consumer Financial Protection Bureau’s (CFPB or Bureau) enforcement of its final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule) to cover all small business lenders nationwide. A discussion of the preliminary injunction issued by that Texas federal court on July 31 can be found here. The injunction in Texas Bankers Association v. CFPB will dissolve if the U.S. Supreme Court reverses the Fifth Circuit in Community Financial Services Association v CFPB (CFSA case), which found the CFPB’s funding structure unconstitutional.